Faisol

The impact of Financing of Syariah Bank toward the performance and

Welfare of Small Medium Enterprise

Faisol
faisol@unpkediri.ac.id
The Faculty of Economy at Departement of Accounting
Nusantara University of PGRI Kediri East Java Indonesia

Abstract
The purpose of this paper is to examine empirically the influence financing of
Syariah Bank toward the business performance, the influence of financing of syariah
bank toward welfare of small entrepreneurs, and the influence of performance of
UKM toward the welfare of small entrepreneurs. The population of this research is
all of the small medium enterprises in the District of Kediri who got Islamic bank
financing for one year. These samples included 71 SMEs agribusiness. Sampling
was done by purposive sampling research, namely SME agribusiness got Islamic
bank financing for one year, with a workforce of 5 to 19 people. Questionnaire was
used as a tool to collect primary data. The method of analysis used partial least
square (PLS). Testing is done with a structural model (Inner model) and models of
measurement (Outer model). Statistically, the results show that the Islamic bank
financing significant influence with a positive direction on the performance of SMEs,
this means that when the Islamic bank financing improved, will improve the
performance of SMEs, further financing Islamic banks have a significant effect with
positive direction towards the well-being of SMEs so that when the Islamic bank
financing improved well-being of SMEs will be increased then the performance of
SMEs have significant influence in a positive direction for the welfare of SMEs. So if
the business performance of SMEs improved, well-being will increase.

Keywords: Islamic Bank Financing, business performance, welfare, small

entrepreneur.

INTRODUCTION
Syaria bank is an Islamic financial institution had a purpose and function. It goal reaches the
profitable as businesses and non-profit organizations as a non business. Th profit purpose is in order to
achieve the advantages of the world and the hereafter, while non-profit purpose is in order to achieve
the hereafter. Two of these goals make the bank function as business organizations as well as social
institutions. (Arcarya: 2013).
Syaria bank as a business institution implemented Islamic bank as an intermediary institution that
serves to connect between the surplus or the owner of the funds with the minus-one that requires
funding, for example, employers, government and household sectors. Intermediation done here is
expected to stimulate the real sector. The presence of Islamic banks in the banking industry is expected
to contribute in the real sector, in fact it is the primary duty of Islamic banks. Banking activities in the real
sector, among others, is to channel financing to scores of business. In terms of financing, Islamic banks
differ from conventional banks. Activity in the finance portfolio will increase the venture capital sector.
Funding in this study is defined as an investment, because investment means spending aimed for
improving or maintaining the stock of capital goods consisting of machinery, factories, offices and
durable products that are used in the production process. Investment is also defined as expenditures or
capital investment expenditures. The Company purchased capital goods and the equipmemt of
production to increase the production capacity of goods and services available in the economy.

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According to Paul A. Samuelson and William D. Nordhaus, (1996: 183), investment is
expenditure made by the investment concerning the use of resources such as equipment, buildings,
production equipment and other new machinery or supplies are expected to be benefit from the
investment. Factors that can determine the level of such investments; the profit rate of investment is
forecast to be obtained, the interest rate, predictions of future economic circumstances will come,
inflation rates, technological advances, income level and its changes.
Syaria banking in its efforts to boost the real sector can be seen in the data published by Indonsia
Bank through Islamic Banking Statistics data published every month. Financing provided by Syaria Bank
based types of transaction as shown in Table 1. The data shows the composition of funding channeled
Syaria Banks and Sharia Business Unit between the years 2007-2014.

Table 1. Financing Composition of Islamic Commercial Bank and Islamic Business Unit (Milyar)
Akad 2007 2008 2009 2010 2011 2012 2013 2014
Mudharaba 5.578 6.205 6.597 8.631 10.229 12.023 13.625 14.354
Musharaka 4.406 7.411 10.412 14.624 18.960 27.667 39.874 49.387
Murabaha 16.553 22.486 26.321 37.508 56.365 88.004 110.565 117.371
Salam 0 0 0 0 0 0 0 0
Istishna 351 369 423 347 326 376 582 633
Ijara 516 765 1.305 2.341 3.839 7.345 10.481 11.620
Qardh 540 959 1.829 4.731 12.937 12.090 8.995 5.965
Others 0 0 0 0 0 0 0 0
Total 27.944 38.195 46.886 68.181 102.655 147.505 184.122 199.330
Reference: BI, Statistik Perbankan Syariah 2015

Based on data in Table 1 shows the composition of funding channeled by Islamic Banks and
Sharia Business Unit between the years 2007- 2014, in which the distribution of funding with murabahah
shows the highest number compared with other financing. This indicates that Islamic Bank in financing
distribution is more directed at low-risk financing are Murabahah, and the next stage leads also on
financing of musyarakah because there is a sharing of risk and return to the customer.
Basically SMEs have always faced different kinds of main difficulties were related to capital,
management skills, mastery of technology, the availability of raw materials, marketing, skill, and labor
wage. Among these problems, the most frequently encountered are the limitations of capital or
financing, marketing difficulties followed as the second major problem, and the problem of raw material
shortages (Tambunan, 2002: 70).
Immadudin (2015) revealed that around 50% of the total micro, small, and medium enterprises
(SMEs) lack of capital. According to the survey 50 percent of their main problems is the shortage of
venture capital, and then mentioned the difficulty in marketing at 24%, lack of expertise 7%, and other
factors which reached 19%. Immadudin explained that the SME sector contributes to the national
economy because it is able to absorb 107 million workers, or about 97.2% of the total workforce in
Indonesia. "The contribution of SMEs to absorb the labor force is much larger than the big business
sector around 2.8 persen. SMEs is in dire need of financing in the framework of development efforts, but
still hard to get easy access to the formal financial institutions, including the Islamic Bank, so it is not
uncommon their financing needs financed by renterneeer.
Ulama Council of Indonensia also states that many Muslim businessmen is located on the bottom
layer. Muslim businessmen rarely can reach intermediate layer especially in the upper layers. Therefore,
the increase in SME financing by Islamic banks needs to be done not only for muslim SMEs but also
non-Muslims in the sense that SME financing is really rahmatan lil 'alamin, so it applies to all SMEs,

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both Muslims and non-Muslims. Thus the existence of Syaria banks, in particular related to its ability to
finance, should be done in the spirit of mutual help as Allah QS. Al Maidah verse 2

“......dan tolong-menolonglah kamu dalam (mengerjakan) kebajikan dan takwa, dan jangan
tolong-menolong dalam berbuat dosa dan pelanggaran dan bertakwalah kamu kepada Allah,
Sesungguhnya Allah amat berat siksa-Nya.”
Poverty in rural areas is crucial problem that can not be delayed in its overcoming and should be
a top priority of economic development and social welfare. Therefore Kediri regency made development
based on agriculture, especially in agribusiness. In efforts to develop agriindustri or agribusiness that is
still the key problems about the lack of capital, in addition to technology and marketing.
The motivation of this study is the first; Problems of capital in agriculture need to be examined as
to how the role of Syaria banks in financing in agriculture. Financing Islamic Bank profit loss sharing
system is an appropriate financing to be distributed on the agribusiness which is full of a risk business
(Sutawi, 2008). But in reality the data Islamic Bank in the District of Kediri shows the distribution of
funding for the agricultural sector ranged from 6.5% of the total financing distributed. This shows the
commitment of Islamic banks to the agriculture sector as a leading sector in the district of Kediri
including agribusiness SMEs is still very low.
The increase of financing Islamic Bank is expected to improve business performance as stated by
Gronroos (1990) that the stronger the relationship between small businesses and the bank then will
make the better performance. Choudury, et al (2008) stated the same thing, that small businesses get
the loan from the bank financing will result in good performance if the bank performs proactive
relationships with small businesses. In addition to improving business performance, financing from
Syaria banks are expected to take effect in improving the well-being of SMEs. So after getting financing
from Syaria Bank, it is expected venture capital or infrastructure of agribusiness SMEs are fulfilled in
facilities, so they can improve performance in performing activities of production to marketing its
products in order to achieve growth in assets and profitability.
Performance can be defined as the achievements of the organization or company with a certain
size. Performance by Islam is not only material success but also the success of non-material. Therefore,
Islam is a performance measure (1) profit and non materiial bai material, (2) growth, (3) sustainability,
and (4) the blessing or the pleasure of Allah SWT. Supadie (2010; 86) states that the purpose of a
business other than material profit (qimah Muhammadiyah) should also get the benefit of non material
that oriented to a) qimah insaniyah namely kemanfaatn humanitarian nature, for example through
employment, ZIS (Zakah, Infaq, and Sholat), b) qimah khuluqiyah value noble moral values (akhalquh
kharimah) basic foundation in managing the company, so as to create an Islamic brotherly relations and,
c) qimah ruhiyah namely berketuhanan consciousness.
Associated with the SME Business Performance indicators used include sales, operating income,
market share and ability to pay zakat, infaq and Sadaqah. Of the increase in all indicators are distributed
to all components of SMEs so as to promote employment as the company's performance, distributive
justice and welfare society. Agribusiness is a business in which agriculture can also be judged
performance which included assets, income, sales and prices. Based on the data of the main problems
of SMEs, hence their lack of capital will reduce the ability of agribusiness in providing raw materials, and
this will have an impact on the lack of creative ability or in product innovation. Therefore, it is needed the
fulfillment of financing capital including Islamic Bank.
If SMEs are still experiencing problems such as raw materials, marketing, capital and the other
then its business performance will decline. This is due to businesses that lack capital, will have difficulty
in providing raw materials, it is difficult to innovate, so that sales, profits and assets of the business as
an indicator of business performance will also decrease.

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The second motivation is the level of agribusiness SME’s welfare as the welfare conditions had
been experienced by farmers and other small businesses in general relatively low both in terms of
material and spiritual. This happens in most small agribusiness entrepreneurs in rural areas, they are
generally difficult to maintain the sustainability of its business, due to the difficulty in obtaining capital. so
the fulfillment of venture capital is one of the solutions that are needed by agribusiness SMEs in order to
achieve their welfare.
Mustafa Ahmad Zarqa stated that Imam al Ghazali was the first Muslim scholars to formulate the
concept of social welfare function. In discussing human affairs, including economic activity, al-Ghozali
always refers to the concept maslahah (welfare) as its central theme. According to Imam al ghozali in
Euis (2005: 123) maslahah (welfare) is maintaining the objectives of sharia which is located at:
1. Protection of religion (Hifdzud -Diin)
2. Life insurance (Hifdzan-nafs)
3. Protection of sense (Hifdzal-Aql)
4. Protection descent / honor (Hifdzan-Nasl), and
5. Protection of property (HIfdzal-Maal)
This is in accordance with the guidance of revelation, that the purpose of human life is to achieve
happiness of living in the world and the hereafter (mashlahat wa al-din al-dunnya). Al-Syatibi in Karim
(2004: 381) argued that the sharia is aimed at establishing the welfare of human being in the world and
the hereafter. The welfare in this case is defined as everything related to human sustenance, the
fulfillment of human needs, and the acquisition of what is demanded by the qualities of emotional and
intellectual, in an absolute sense.
Islamic economics looked at not only from the world alone, but prosperity is based Maqasid
Sharia includes the first ad-din shown its ability in running the instructions of Islamic religion, which is
measured from the zakat, infaq, sadaqah issued by SMEs agribusiness financed Islamic banks, second
an-nafs is the working conditions indicated on the ability in keeping the soul in this case measured from
the cost of food shopping nutritious capable issued by SME agribusiness financed syaria bank, third, al-
aql is the well-being shown from the ability in maintaining reasonable measured of expenditure in
increasing skill in the field of business, the fourth an-nasl is wellbeing presented from the ability in
keeping the offspring measured from the expenditure to improve the quality of life of children (school,
course, investment land, rice fields), and five al-maal is welfare indicated the amount of income
received from agribusiness SMEs receiving financing syaria banks.
This study is a replication of a study conducted by the Sri Herianingrum (2014). In the study used
a sample of 70 employers of tijaroh ziroah with quantitative and qualitative approaches. The results
showed that the Islamic bank financing has a significant influence on the performance tijaroh ziroah
businessman with a positive direction. Islamic bank financing has a significant influence on the welfare
of the positive direction. Performance tijaroh ziroah employers have a significant influence on the
welfare of tijaroh ziroah businessman with a positive direction. The difference in this study with previous
research is years observed in this study took years 2013-2015, with a total sample of 71 SMEs in the
District / City of Kediri.
Based on the above phenomenon, namely the impact of the distribution of Islamic bank financing
to performance in the form of profits, business assets and also for the welfare of the SME agribusiness,
the purpose of this study was to analyze the influence of Islamic bank financing affect the performance
of SMEs agri-business, the influence of Islamic bank financing influence on the welfare SME
agribusiness, and the influence of the agribusiness SME performance effect on welfare
.
RESEARCH METHODS
The population of this research is all SMEs in the district/city Kediri who have got the financing
form syaria bank and complying with the provisions of Law No. 20 of 2008. According to data from the
Department of Cooperatives, Department of Agriculture, syaria banks in the districts/cities consist of 240

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entrepreneurs. The place of Kediri been choosen because there is a high potential in the small business
agribusiness, but it still needs to be done to explore the potential of these improvements.
The types of data in this study are primary data obtained directly from the original source, namely
through questionnaire. The techniques of collecting data via survey by SME in agriculture, fisheries,
vegetables, flowers and fruit, and rice mechinery. The research sample was 71 SMEs were taken by
purposively, with provisions where SMEs have a work force of 5 to 19 people, who got financing of
syariah bank at the district Kediri in the year of 2013/2015. The variables in this study consisted of
exogenous and endogenous variables. Varibale exogenous in this study is the financing of syaria bank
(X1), whereas endogenous variables consisted of intervening variables and the dependent variable.
Intervening variables consist of business performance variables (Y1), while the dependent variable is
the well-being of SMEs (Y2).
The financing of syaria bank (X1) is based on the Islamic principles of financing distributed by
syaria bank to the respondents, namely SMEs. This variable is measured by three indicators, namely of
financing of mudharaba (X1.1), the financing of musyaraka (X1.2), and financing murabaha (X1.3). The
indicators used to measure variables of financing of syaria bank are as follows: a). Mudharaba financing
is that the respondents' assessment of the adequacy of the transaction of mudaraba financing that has
been received from syaria bank, b). Musharaka financing is the respondents' assessment of the
adequacy of the transaction of musharaka financing that has been received from Bank Syariah, c).
Murabahah financing is the respondents' assessment of the adequacy of the transaction of murabaha
financing that has been received from syraia bank. The measurement of financing syaria bank variabel
is done by measuring the level of adequacy of funding received by small entrepreneurs. Each indicator
uses a Likert Scale adequacy level with a range of 1-4: 1 = very insufficient, 2 = insufficient, 3 =
sufficient, 4 = very sufficient. The value of 1 or very insufficient meant that small business got financing
from syaria bank is not more that 25% the financing value that requested. The value of 2 or isufficient
meant that small business got financing of syaria bank between 25% until 50% the financing value that
requested. The valaue of 3 or sufficent meant that the small business got the finaning of syaria bank
between 51% until 75% the funding value that requested. The value of 4 or very sufficient meant that
the small business got the financning of syaria bank between 76% until 100% the financing value that
requested.
Business Performance of SMEs (Y1) is the respondents' assessment of the achievements of
the business after obtaining financing syaria bank that is measured in terms of the results of work in the
form of huge profit achieved, and the assets of the business. This variable is measured by two
indicators: operating profit (Y1.1) and business assets (Y1.2). The indicator used to measure business
performance variable is 1). Profit or gain is the assessment of respondents to its operating profit after
obtaining financing Syaria Bank. 2). Assets of the business is the respondents' assessment of the
achievements of his business assets after obtaining financing Syaria Bank. The second measurement of
business performance indicators in the variable is done by using a Likert scale. Likert scale used is the
1-4 range, namely; 1 = strongly unincrease, 2 = not increase, 3 = increase, 4 = greatly increased. A
value of 1 or strongly not increases when income and business assets increased by 1% to 4%, the
value 2 or not increased if the income and business assets increase between 5% to 9%, a value of 3 or
increases when income and business assets increase between 10 % to 14%, a value of 4 or greatly
increases when income and business assets increase more than 15%.
Welfare of SMEs (Y2) is an assessment of respondents to the happiness of the world and the
hereafter, and a better life based on the concept of sharia experienced by SMEs who received financing
Islamic Bank. This variable is measured by five indicators of ad-din (Y2.1) is an assessment of the
economic security (welfare) of the respondents that is indicated with their ability in implementing the
commands of Islamic religious, which are measured by the zakat, infaq, shadaqah issued by the
respondent after obtaining financing Islamic Bank, an- nafs (Y2.2) is an assessment of welfare of the
respondents that is indicated with the ability in keeping the soul which are measured by the costs or

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expenditure incurred by SMEs for the consumption of nutritious foods, al-aql (Y2.3) is the assessment
of the respondents indicated with the ability in the welfare to maintain and keep the rationality that is
measured by the expenditure in improving his skills in the business, an-Nasl (Y2.4) is an assessment of
respondents' well-being shown on the ability to maintain and keep descendant that is measured by the
expenditure to improve the quality of children life (schools, courses, investation in land, gardens, fields,
houses) and al-maal (Y2.5) is an assessment of respondents' well-being is evident from the amount of
income received by SMEs who received financing Islamic Bank.
Instruments in this study are a questionnaire using a Likert scale of 1-4, as described in each of
the above research variables. There are three tests for the study variables: 1). Test the validity of the
variable 2). Reliability test 3). Test Validity discriminant.
Validity test is done by using convergent validity indicators that exist in the model. Each indicator
in the model should meet the convergent validity, which has a value of more than 0.5. If any indicator
has had a value of more than 0.5 loading factor evaluation step can be continued. Ghazali (2011: 74)
explains that constructs with formative indicators can not be analyzed with a view convergen validity and
composite reliability. This is because the formative constructs is basically a regression relationship of
indicators to judge it based on how to construct the regression coefficients and the significance of the
regression coefficients. So to construct formative assessed with outer weight of each indicator, with the
decision that if each of the indicators the value of t statistic > t-table (1.96) it is said to be significant, so
the evaluation step can proceed. While the reliability test performed by using the composite reliability.
Value composite reliability for all constructs declared reliable if the value is above 0.6 (Ghozali, 2011:
115). Then test the discriminant validity. To view the discriminant validity is to see the value of Average
Variance Extracted (AVE). Ghozali (2011: 116) recommends a good construct validity required by the
AVE value should be above 0.5.
The Partial Least Square (PLS) was used to determine the effect of exogenous variables to
variable indogen. Partial least squares models that can be analyzed and presented in order to provide a
representative result, then the model must be tested first with inner and outer models. Model latent
variables and indicators in this study are described as follows:

Picture 1. Research Model

RESULT AND DISCUSSION

In this research used the analysis of inner model and outer model. Inner model is the
specification of relation between laten variables while the outer model is the specification of the relation
between laten variable with indicators. In this step, described about validity of test results on variable
Financing of syaria bank.
The validity test on syaria bank financing used outer weight because the variable is formed
formatively, that is by comparing the value of the t statistic with t table of each indicator. Based on the
results can be explained that the outer weight indicator X11, X12, and X13 is significant. As shown in
Table 2 below
Table 2. Hasil Outer Weight dari Bootstrapping
No Indicators Original Sample Standard T Statistic P
Sample Mean (M) Error Values

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1. Mudharaba 0,402 0,410 0,037 10,951 0,000
2. Musyaraka 0,308 0,306 0,035 8,699 0,000
3. Musyaraka 0,383 0,377 0,048 7,989 0,000
Reference: analisis Smart PLS 3

Convergent Validity Test on SMEs Performant Variable.

The test results of confirmatory factor indicates that each indicator has a value of loading factor of
greater than 0.5. This means that all indicators of the variable are declared valid to be an indicator of the
endogenous variables SMEs performance. The test results of confirmatory factor described in the figure
below:

Profit of UKM (Y11)

0,900
PERFORMANCE
OF UKM (Y1)

0,747 Asset of UKM

(Y12)

Picture 2. Result of Loading Factor on variables SMEs performance

Convergent Validity Test on Welfare Variable

The test results of confirmatory factor indicates that each indicator has a value of loading factor of
greater than 0.5. This means that all indicators are considered valid to be an indicator of welfare
variables of SMEs. The test results can be seen in the following figure:

Ad-Diin (Y21)

0,713
An-Nafs (Y22)
0,789
Welfare of
UKM (Y2) 0,818
Al-Aql (Y23)
0,873
0,931 An_Nafs (Y24)

Al-Maal (Y25)

Picture 3. Result of loading factor on welfare of SMEs

The test of Reliability

The result of reliability rest to examine the composite reliability for each construct shown in Table 1
below:
Table 3. Result of Composite Reliability Test
No. Variable Composite Reliability
1 Financing Syariah Bank 0,941
2 Performance of UKM 0,811
3 Welfare of UKM 0,916

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Based on the above table shown taht all of constructs have a composite reliability values
greater than 0.60. This illustrates that the Bank Syariah Financing (PBS), the business performance of
SMEs (KU SMEs) and welfare (Kesej) has a good reliability.

Discriminant Validity Test.

To view the discriminant validity is to see the value of Average Variance Extracted (AVE). Ghozali
(2011: 116) recommends that a good construct validity required by the AVE value should be above 0.5.
Based on the discriminant validity test results showed that all of variables have good discriminant
validity (above 0.5). Results can be seen in the following table

Table 4. Result of Average Variance Extracted (AVE) Test

No. Variable Average Variance Extracted
1 Financing Syariah Bank 0,841
2 Performance of UKM 0,684
3 Welfare of UKM 0,686

At this stage of the analysis are shown the results of calculations by using partial least square
and three variable relationship in Figure 4, the results indicate that a significant difference between the
positive trending variable of financing Islamic Bank, the performance of SMEs and SME Welfare.
Financing Bank Syariah has significant influence in a positive direction towards welfare, financing
Islamic bank has a significant effect on positive direction towards prosperity. The performance of SMEs
has positive significant effect on welfare. Results of testing the hypothesis of this study appear in Figure
4 below
Performance
of UKM t: 2,686
t: 6,525 (Y1)
β: 0,513 β: 0,354

t: 3,602
Financing of β: 0,348 Welfare of
Syariah Bank
(X1) UKM (Y2)

Picture 4. Result of Partial Least Square Test

Results of testing the path coefficients are shown in Table 5 indicate that the variable of Islamic
bank financing has significant influence with a positive direction on the performance of SME with
coefficient parameters of 0,0,456 and the statistical value of 4,435 t (t statistic > 1.960). The Financing
of Islamic bank with a significant effect on the welfare of the positive direction with coefficient of 0.421
and the value of the parameter t statistic of 4.582 (t statistic> 1.960). The business performance of
SMEs has significant influence with positive direction towards prosperity with coefficient of 0.304 and
exhibited significantly with the value of statistic of 2.298 (t statistic > 1.960)

Table 5. Result of Path Coefficients

Coeficients Sample Standard
Variables path Mean (M) Error T Statistic P. Values
Financing of Syariah Bank > Perform.
of UKM 0,513 0,519 0,079 6,525 0,000
Financing of Syariah Bank > Welfare
of UKM 0,354 0,362 0,098 3,602 0,000
Perform. of UKM > Welfare of UKM 0,348 0,362 0,130 2,686 0,007

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Based on the test results the path coefficients as shown in Table 3, the hypothesis testing
results can be obtained as follows:

a. The first hypothesis is Islamic bank financing a significant effect on business performance. Based
on the results of calculations PLS in Table 3 show that the financing of syariah bank has significant
influence toward the performance of SMEs with a positive direction. Statistically proven with the
value t-statistic of 6.525 is greater t-table (1.960), while the value of the estimated coefficient (β) of
0.513. This means that the better the Islamic bank financing, the better the performance of SMEs. In
other words, if the Islamic bank financing (PBS) were given to SMEs to be improved both in quality
and quantity will be increased on the performance of SMEs. Conversely the smaller Islamic banks
granted financing SMEs lead the business performance of SMEs is getting low. This means that by
getting the Islamic bank financing will enhance the ability of SMEs to provide capital or means of
business, thus increasing productivity and increased sales revenue and profit increases so achieved
performance increases.

b. The second hypothesis is the Islamic bank financing has significant effect on welfare. Based on the
results of calculations PLS in Table 3 shows that the Islamic bank financing with a significant effect
on the positive relationship toward prosperity. It is proven statistically to see the value of t-statistic of
3.602 bigger with t-table, (1,960), while the value of the estimated coefficient (β) of 0.354. This
means that the better the financing of Islamic banks, the better the well-being of SMEs will be. In
other words, if the Islamic bank financing is granted to SMEs increased both the quality and quantity
will be able to improve the welfare of SMEs. Conversely the smaller Islamic banks granted financing
SMEs lead to lower welfare of SMEs. Basically funding channeled to SMEs will affect the business
conduct of SMEs, namely the existence of sufficient working capital will provide peace, tranquility in
the business, so that the creativity of the business increases, business expansion and opportunities
owned businesses also increased. Such conditions will increase the income of SMEs that will
improve the economic security.

c. The third hypothesis is the performance of SMEs have a significant effect on the welfare. Based on
the results of test calculations PLS in Table 3 indicate that the performance of SMEs have a
significant effect in relation to the welfare of the positive direction. It is proven statistically to see the
value of t-statistic of 2.686 is greater with t-table (1.960), while the value of the estimated coefficient
(β) of 0.348. This means that the better performance of SMEs, the better the well-being of SMEs. In
other words, if the performance of SMEs improved both the quality and quantity will be able to
improve the welfare of SMEs. Conversely the smaller the SME performance led to lower welfare.
Improved performance in the form of profits and assets will facilitate SMEs reach to welfare based
on maqasid sharia.

CONCLUSION
Based on the analysis that has been described, it can be drawn several conclusions as follows.
Financing Islamic bank has significant effect on the performance of the business with a positive
direction. These test results proved that if the Islamic bank financing granted to SMEs increased both
the quality and quantity then will improve its performance. Financing Islamic bank has significant effect
on the welfare of the positive direction. These test results proved that increased funding channeled to
the SMEs increasing prosperity of SMEs. Performance of SME has significant effect on welfare with a
positive direction. The results of this study demonstrated that increased business performance at SMEs
will increase welfare of SMEs. Improved performance of the ability to get its operating income and
assets tend to increase the ability of SMEs to improve the welfare of the maqasid sharia.

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